Coal News We love to talk!

FEB 10 2015

Oil could plunge to $20, and this might be `the end of Opec': Citi

  • Economic Times, ET Bureau / Hyderabad
  • Created: Tue 10th FEB 2015

The recent surge in oil prices is just a "head-fake," and oil as cheap as $20 a barrel may soon be on the way, Citigroup said in a report on Monday as it lowered its forecast for crude. Despite global declines in spending that have driven up oil prices in recent weeks, oil production in the US is still rising, wrote Edward Morse, Citigroup's global head of commodity research. Brazil and Russia are pumping oil at record levels, and Saudi Arabia, Iraq and Iran have been fighting to maintain their market share by cutting prices to Asia.

The market is oversupplied, and storage tanks are topping out. A pullback in production isn't likely until the third quarter, Morse said. In the meantime, West Texas Intermediate (WTI) crude, which currently trades at around $52 a barrel, could fall to the $20 range "for a while," according to the report. The US shale-oil revolution has broken Opec's ability to manipulate prices and maximize profits for oil-producing countries.

"It looks exceedingly unlikely for Opec to return to its old way of doing business," Morse wrote. "While many analysts have seen in past market crises `the end of Opec,' this time around might well be different," Morse said. Citi reduced its annual forecast for Brent crude for the second time in 2015. Prices in the $45-$55 range are unsustainable and will trigger "disinvestment from oil" and a fourth-quarter rebound to $75 a barrel, according to the report. Prices this year will likely average $54 a barrel. Bloomberg

Tags

Iraq Oil Asia United States Saudi Arabia Russia Organization of Petroleum Exporting Countries Iran

Related News

  • Ahead of project stake sale to ONGC, GSPC to spin-off KG Basin block into new company  Read more
  • RIL, Essar Oil to gain from likely price cut in some Saudi crudes  Read more
  • Actis in talks to promote new renewable energy platform, after Ostro success  Read more
  • Weak monsoon may fuel diesel demand for farm sector  Read more
  • Oil firms told to buy half their dollars from one PSU bank  Read more
  • Japan keen to support energy network among SAARC countries  Read more
  • Indian oil refiners issue tanker tenders aimed at boosting domestic shipping  Read more
  • First time in 7 years: Diesel price likely to come down as brent crude slips below $100  Read more
  • The other side of gas  Read more
  • LPG price touches Rs 3,000 per cylinder in Manipur on economic blockade  Read more